Judgment and Decision Making at Work

Scott Highhouse, Reeshad S. Dalal, Eduardo Salas, Scott Highhouse, Reeshad S. Dalal, Eduardo Salas

• Publisher: Routledge
• Year: 2013
• Print ISBN:
  9781138801714
• eBook ISBN:
  9781135021948
• Topic: Business
• Subtopic: Organisational Behaviour
• Index: Business

Employees are constantly making decisions and judgments that have the potential to affect themselves, their families, their work organizations, and on some occasion even the broader societies in which they live. A few examples include: deciding which job applicant to hire, setting a production goal, judging one's level of job satisfaction, deciding to steal from the cash register, agreeing to help organize the company's holiday party, forecasting corporate tax rates two years later, deciding to report a coworker for sexual harassment, and predicting the level of risk inherent in a new business venture. In other words, a great many topics of interest to organizational researchers ultimately reduce to decisions made by employees.

Yet, numerous entreaties notwithstanding, industrial and organizational psychologists typically have not incorporated a judgment and decision-making perspective in their research. The current book begins to remedy the situation by facilitating cross-pollination between the disciplines of organizational psychology and decision-making. The book describes both laboratory and more "naturalistic" field research on judgment and decision-making, and applies it to core topics of interest to industrial and organizational psychologists: performance appraisal, employee selection, individual differences, goals, leadership, teams, and stress, among others. The book also suggests ways in which industrial and organizational psychology research can benefit the discipline of judgment and decision-making. The authors of the chapters in this book conduct research at the intersection of organizational psychology and decision-making, and consequently are uniquely positioned to bridging the divide between the two disciplines.

1

Introduction to Judgment and Decision Making

Scott Highhouse, Reeshad S. Dalal, and Eduardo Salas

Most introductory chapters begin with a definition of the research area they are summarizing and applying. It seems difficult, however, to come up with a definition of judgment and decision making (JDM) research that is not tautological. We chose, therefore, to borrow (i.e., steal) a definition from another book on the topic. In Goldstein and Hogarth’s (1997) excellent book on the trends and controversies in JDM, the authors defined the psychology of judgment and decision making as the field that investigates the processes by which people draw conclusions, reach evaluations, and make choices. That seems as good as anything we might have come up with. But, there is something sterile and dissatisfying about this definition. It glosses over what Goldstein and Hogarth acknowledged is the broad and sometimes puzzling nature of a field that contains “a number of schools of thought that identify different issues as interesting and deem different methods as appropriate” (p. 3).

The three editors of this volume, if pressed, will confess to being influenced by different streams of research and different perspectives on how JDM should be studied. The first and second editors (Highhouse and Dalal, respectively) identify most with the bounded rationality (Simon, 1957) perspective that is best exemplified by the heuristics and biases program of Kahneman, Slovic, and Tversky (1982) and the “everyday irrationality” perspective of Dawes (1988, 2001). These approaches see considerable value in understanding and improving JDM by focusing on how it may go wrong. This is often done in a decontextualized environment where specific processes may be isolated.

Yet, the second editor is also somewhat sympathetic to approaches that focus on the adaptive nature of heuristics. These perspectives are similar in spirit to a long tradition of research on Brunswik’s lens model (Hammond, 1955), and are often associated with Gigerenzer (1993) and his ABC group at the Max Planck Institute. This group is concerned with “fast and frugal” heuristics that make us smart. These traditions focus on judgment and decision performance in a contextualized environment, and have revealed that some of the biases identified by Kahneman, Tversky and colleagues (e.g., Kahneman et al., 1982) are attenuated, though not completely eliminated, when presented in contexts familiar to research participants.

The third editor (Salas) takes a radical departure from these perspectives. He focuses on real-world decision making, particularly in crisis situations. This perspective has its roots in dynamic decision making (Brehmer, 1990) and naturalistic decision making (Klein et al., 1993), and focuses on decisions involving extreme time pressure, complexity, expertise, and high stakes. Of the various approaches to studying judgment and decision making, this approach has arguably made the greatest inroads into industrial-organizational (I-O) psychology (Salas, Rosen, & DiazGranados, in press), perhaps because it emphasizes field research in occupational contexts—or perhaps because the third editor is so productive.

RECOGNITION IN PSYCHOLOGY

Whereas the field of industrial-organizational psychology has been around for over 100 years, the psychological study of judgment and decision making is considerably younger. Table 1.1 shows a timeline of important milestones in the JDM field. Although some might quibble with an inclusion here or an exclusion there, most scholars of JDM would agree that this table captures the important events that have shaped the field. As the timeline shows, early research in this area was stimulated by important contributions in the 1950s, especially the piece by Ward Edwards, who is widely recognized as the founder of behavioral decision theory. Edwards introduced psychologists to the expected utility model, and challenged them to consider whether decision makers actually behaved this way.

With the normative model as a standard against which decision making can be compared, the field of JDM has enjoyed an enormously fruitful youth. Studies over the 1960s, 1970s, and 1980s drew from economics, psychophysics, social psychology, and elsewhere to identify a profusion of shortcomings associated with everyday judgment and decision making. The list of cognitive biases includes ambiguity aversion, anchoring and adjustment, availability, base rate neglect, certainty effect, confirmation trap, conjunction fallacy, decoy effect, denominator neglect, dilution in prediction, duration neglect, endowment, evaluability weighting, focusing effect, framing effect, gambler’s fallacy, hindsight, honoring sunk costs, illusion of validity, illusory correlation, loss aversion, omission, outcome prejudice, overconfidence, phantom effect, planning fallacy, probability neglect, pseudodiagnosticity, representativeness, small-sample error, status quo effect, subadditivity, temporal discounting, and probably more. Moreover, explaining these phenomena to the general public has resulted in best-selling books by prominent JDM scholars (see Table 1.2). The success of these endeavors shows that: (a) JDM has permeated popular culture and our everyday language, and (b) JDM topics have considerable relevance to everyday life, including life at work. The applied relevance of JDM research is one reason that authors have seen considerable potential for it to inform research and practice in I-O psychology and related fields (Dalal et al., 2010; Moore & Flynn, 2008; Rosen, Shuffler, & Salas, 2010).

TABLE 1.1
Important Milestones in the History of Judgment and Decision Making (JDM)

1950s	• Ward Edwards (1954) defines the domain of JDM in a classic 1954 Psychological Bulletin article
	• Paul Meehl (1954) publishes the classic Clinical Versus Statistical Prediction
	• Kenneth Hammond (1955) applies Egon Brunswik’s lens model to clinical prediction
	• Herbert Simon (1955) introduces the concept of “bounded rationality”
	• Luce and Raiffa (1957) publish Games and Decisions
	• Leon Festinger (1957) presents the theory of cognitive dissonance
1960s	• Ellsberg paradox (1961) stimulates interest in psychology of ambiguity
	• Allen Parducci (1966) introduces range-frequency theory
	• James Stoner (1968) introduces the risky shift phenomenon (the initial impetus for the broader group polarization phenomenon) in group decision making
	• Amos Tversky (1969) publishes “Intransitivity in preferences”
1970s	• Barry Staw (1976) introduces escalation of commitment
	• Janis and Mann (1977) publish Decision Making
	• Kahneman and Tversky (1979) introduce prospect theory
	• Robyn Dawes (1979) publishes the “The robust beauty of improper linear models”
1980s	• First JDM meeting is held in 1980
	• Richard Thaler (1980) introduces mental accounting
	• Nisbett and Ross (1980) publish Human Inference: Strategies & Shortcomings of Social Judgment
	• Norman Anderson (1981) introduces information integration theory
	• Kahneman, Slovic, and Tversky (1982) publish the classic Judgment Under Uncertainty: Heuristics and Biases
	• Naylor (1985) changes the name of his journal to Organizational Behavior and Human Decision Processes
	• Society for Judgment and Decision Making (SJDM; www.sjdm.org) is established in 1986
	• Calderwood, Crandall, and Klein (1987) define the field of naturalistic decision making
	• Journal of Behavioral Decision Making introduced in 1988
	• Robyn Dawes (1988) publishes first edition of Rational Choice in an Uncertain World
1990s	• Gerd Gigerenzer (1991) challenges heuristics and biases paradigm
	• Max Bazerman (1991) publishes first edition of Judgment in Managerial Decision Making
	• Tetlock (1991) introduces “people as politicians” perspective on JDM
	• Shafir, Simonson, and Tversky (1993) introduce reason-based choice
	• Klein, Orasanu, Calderwood, and Zsambok (1993) publish Decision Making in Action
	• Scott and Bruce (1995) publish Decision-Making Style: The Development and Asse...

Table of contents

• Cover Page
• Half Title Page
• The Organizational Frontiers Series
• SIOP Organizational Frontiers Series
• Title Page
• Copyright Page
• Dedication
• Contents
• Series Foreword
• About the Editors
• About the Contributors
• List of Abbreviations
• 1 Introduction to Judgment and Decision Making
• Part I Personnel Decision Making
• Part II Organizational Decision Making
• Part III Decision Making in Action
• Commentary
• Author Index
• Subject Index